Contract Act 1872

Agreement, Contract, Offer and Acceptance

 Meaning of Contract
• 2 (e) Every promise and every set of promises, forming the
consideration for each other, is an agreement;
• 10. What agreements are contracts.—All agreements are contracts if
they are made by the free consent of parties competent to contract, for a
lawful consideration and with a lawful object, and are not hereby
expressly declared to be void.
• Nothing herein contained shall affect any law in force in [India] and
not hereby expressly repealed by which any contract is required to be
made in writing or in the presence of witnesses, or any law relating to
the registration of documents
 Offer and Acceptance = Contract

• Meaning of Offer: 2 (a) When one person signifies to another

his willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal;
• The Person making proposal is called the offeror.
• The person to whom we are making proposal is called offeree.
 Essential of Valid Offer
• 1. Intention to create legal relations:
• The offeror must have a genuine intention to be bound by the terms of the offer if it is
accepted. Social invitations or statements of hope or opinion do not qualify as offers.
• 2. Certainty and definiteness:
• The terms of the offer must be clear and precise, leaving no room for ambiguity or
misunderstanding. Vague or incomplete offers are not enforceable.
• 3. Communication:
• The offer must be communicated to the offeree in a way that they can understand it. This
can be done verbally, in writing, or through conduct. The offeree must be aware of the
offer before they can accept it.
• 4. Specific or general:
• An offer can be specific, made to a particular person or group of people, or general, made
to the public at large. A general offer can be accepted by anyone who fulfills the terms of
the offer.
• 4. Distinction from Invitation to Treat:
• An offer is distinct from an invitation to treat,
which merely invites others to make offers. For
example, a price tag on a store shelf is an
invitation to treat, not an offer to sell the item at
that price. The customer makes the offer to buy
by presenting the item at checkout.
• 5. Capacity to Contract:
• Both the offeror and offeree must have the legal
capacity to enter into a contract. This means they
must be of legal age, of sound mind, and not
under any duress or undue influence that could
impair their judgment.
 Intention to create legal relationship
• 1. Genuine Intention:
• Imagine two friends chatting about going to the movies. One says, "We should catch that new sci-fi film sometime!"
This is not an offer. It's a casual suggestion, lacking the genuine intention to be bound by a specific date, time, or
even the actual movie itself.
• 2. Beyond Social Invitations:
• Social invitations, like "Come over for dinner next week!" fall under the same category. They're friendly gestures,
not legally binding propositions. The host might not have planned anything specific, and their offer can be easily
withdrawn without any legal repercussions.
• 3. Distinguishing from Hope and Opinion:
• Statements of hope or opinion also lack the necessary intent. Saying, "I hope we can make a deal on this car" doesn't
constitute an offer. It expresses a desire, not a commitment to specific terms.
• 4. Examples of Clear Intention:
• In contrast, a formal written offer to purchase a property with detailed terms, conditions, and a deadline for
acceptance demonstrates a clear intention to create legal relations. Similarly, a company advertising a specific
product at a fixed price in a magazine is making a genuine offer to sell that product to anyone who meets the stated
conditions.
Importance of Intention to Create Legal Relationship

• The presence of an intention to create a legal relationship is fundamental to the

formation of a contract.
• This concept is integral to contract law as it underscores the seriousness and
legal consequences of entering a contract.
• In Balfour v. Balfour, the court emphasized that not all agreements between
parties result in contracts because their meanings may not conform to legal
standards.
Simpkins v. Pays

• The case of Simpkins v. Pays illustrates the application of the test of objectivity
• In this case, a mother, her daughter, and a paying guest participated in
crossword puzzles, with the mother’s name being used for the entry
• The court determined that a reasonable person in these circumstances would
have believed there was an intention to share the prize.
• Parker v Clarke (1960)
• Mrs Parker was the niece of Mrs Clarke. An agreement was made that the Parkers
would sell their house and live with the Clarkes. They would share the bills and the
Clarkes would then leave the house to the Parkers. Mrs Clarkewrote to the Parkers
giving them the details of expenses and confirming the agreement. The Parkers sold
their house and moved in. Mr Clarke changed his will leaving the house to the
Parkers. Later the couples fell out and the Parkers were asked to leave. They claimed
damages for breach of contract.
• It was held that the exchange of letters showed the two couples were serious and the
agreement was intended to be legally binding because (1) the Parkers had sold their
own home, and (2) Mr Clarke changed his will. Therefore the Parkers were entitled
to damages.
Agreement between Parent and Child

• Agreements between parents and their children typically fall into the category
of family and social contracts
• These agreements are often presumed not to form binding contracts due to their
familial nature and reliance on trust and good faith
• In contrast, Parker v. Clark demonstrated that, in specific instances, an
intention to create a legal relationship can override the familial context
• Jones v Padavatton (1969)
• In 1962, Mrs Jones offered a monthly allowance to her daughter if she would give
up her job in America and come to England and study to become a barrister.
• Because of accommodation problems Mrs Jones bought a house in London where
the daughter lived and received rents from other tenants. In 1967 they fell out
and Mrs Jones claimed the house even though the daughter had not even passed
half of her exams.
• It was held that the first agreement to study was a family arrangement and not
intended to be binding. Even if it was, it could only be deemed to be for
a reasonable time, in this case five years. The second agreement was only a
family agreement and there was no intention to create legal relations. Therefore,
the mother was not liable on the maintenance agreement and could also claim
the house.
Tests for Determining Intention to Create Legal
Relationship

• To ascertain the existence of an intention to create a legal relationship, courts employ

specific tests
• Meaning of objective test: The objective test focuses on how a reasonable person, in
the position of the parties involved, would interpret the circumstances and the
intentions of the parties
• It aims to evaluate whether a reasonable person would believe that the parties intended
to create a legally binding contract
• This test is crucial as it ensures that the perspective of a reasonable person prevails
over the subjective intent of the parties
Rebuttable Presumption

• •In some cases, such as family or social agreements, the court may presume the
intention to create a legal relationship
• •However, this presumption is not absolute and can be rebutted by providing
evidence of facts and circumstances indicating a contrary intention
• •This approach acknowledges the complexities of personal relationships and
allows flexibility in assessing contractual intent
 Indian Scenario

• Banwari Lal v. Sukhdarshan Dayal: (Justice Chandrachud) (1973 ) 1

SCC 294:
• An extensive area was sub-divided by co-owners into small plots, as
part of housing scheme called “Chandrapur colony”.
• Plot No. 19 was to be reserved as a Dharmshala and yet it was sold to
one Manohari Devi who in turn sold it to Defendant.
• The defendant constructed a boundary wall around the plot, rendering
impossible the use of plot for common benefit.
Communication: General Offers

• Weeks v. Tybald: The defendant “affirmed and

published that he would give £100 to him that should
marry his daughter with his consent.” The court held
that “It is not reasonable that the defendant should be
bound by such general words spoken to excite
suitors.”
Communication (Lalman
Shukla v Gauri Datta)
Indian Scenario
• Dixit had named Shah Rukh Khan as one of the
respondents after claiming she had enrolled for the
coaching course on January 13, 2021, in order to prepare
for the Union Public Service Commission's civil services
exams after being influenced by the firm's advertisement.
• In her complaint, Dixit alleged the firm had assured her
of coaching by good teachers and that her classes would
start on January 14, 2021, which did not happen. She said
in her complaint she had asked the firm to refund her fees
and cancel her admission on January 27, 2021.
Certainty

• Guthing v. Lynn (1831), an offer was made by the offeror that he shall pay the
offeree more money if the horse turns out to be lucky for him. Here, the court
held that the offer made was vague and the term ‘lucky’ was general. The offer
was uncertain and as a result, the offeree could not understand the offer. Thus,
the contract was not considered valid. This case states that a contract must be
made with clarity and certainty. Contracts based on condition precedent are
another category of cases where interpretation of the law is given priority as
such contracts have conditions that must be satisfied for the performance of the
contract to take place.
Offers and None-
Offers
• Mella v. Monahan (1961)
• Offer and Invitation to offer
•
 Types of Offer

• Types of Offer
• 1. Express Offer
• An express offer is made through clear and direct communication, either verbally or in
writing. The offeror leaves no doubt about their intention to be bound by the terms of the
offer if it is accepted.
• person making a presentation to a group of people
• For example, if a salesperson tells you, "I'll sell you this car for $10,000," they are making
an express offer.
Implied offer

• 2. Implied Offer
• An implied offer is not always stated explicitly but can be inferred from the
conduct of the offeror. The circumstances surrounding the offer can indicate
their intention to be bound by the terms if accepted.
• vending machine
• For example, if you put money in a vending machine and select a product, you
are making an implied offer to purchase that product. The vending machine's
acceptance of your money and dispensing of the product is its acceptance of
your offer.
• 3. General Offer
• Type billboard advertisement
• For example, a company might run a newspaper advertisement offering a $10 discount to anyone who
brings in the coupon. This is a general offer, and anyone who brings in the coupon can accept it.
• 4. Specific Offer
• A specific offer is made to a particular individual or group of people. Only the person or group to whom
the offer is made can accept it.
• contract being signed
• For example, a company might send a written offer to a specific supplier to purchase a certain amount of
goods. This is a specific offer, and only the supplier to whom the offer is made can accept it.
• 5. Counteroffer
• A counteroffer is an offer made in response to another offer that proposes different terms. The original
offeror can then accept the counteroffer, reject it, or make another counteroffer.
• For example, if you offer to buy someone's car for $5,000, and they counteroffer by asking for $6,000,
they are making a counteroffer.
Super Market and
mall???
Restaurants
Termination of offer
 Termination of offer
 Before acceptance: If the offeree dies before accepting the offer, the offer
generally lapses and becomes void. This is because an offer is a unilateral
act, and the offeree's acceptance is necessary to create a binding contract.
• After acceptance: If the offeree dies after accepting the offer, the impact
depends on the nature of the offer and any applicable legal provisions:
• Unilateral contracts: For contracts based on the offeree's performance
(e.g., completing a task), the death may terminate the contract unless the
performance can be completed by someone else.
• Bilateral contracts: For contracts involving the exchange of promises
(e.g., buying goods), the offeror may still be bound to their
obligations, depending on the specific terms and legal provisions.
• After acceptance: If the offeree dies after accepting the offer, the impact depends
on the nature of the offer and any applicable legal provisions:
• Unilateral contracts: For contracts based on the offeree's performance
(e.g., completing a task), the death may terminate the contract unless the
performance can be completed by someone else.
• Bilateral contracts: For contracts involving the exchange of promises
(e.g., buying goods), the offeror may still be bound to their
obligations, depending on the specific terms and legal provisions.
• 3. Legal considerations:
• Inheritance laws: In some cases, the offeree's rights under the offer may
pass to their heirs or estate, depending on the specific legal framework
and the terms of the offer.
• Contractual provisions: Some contracts may contain specific clauses
addressing the impact of death on the agreement, providing clarity and
guidance in such situations.